So what is an absorption rate??

When I’m looking at a market to see if it’s leaning toward buyers, sellers — or neither — I look to the absorption rate. This means how long would it take to deplete the inventory at the rate that homes have gone under contract in the last 30 days. (Huh?) Read the rest of this entry »

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The fall of every year has become the “buyers market” season of every real estate year in the past few. While inventory may still be tight in some of our markets in the DC area (the DMV), many purchasers have hibernated, thinking that if they wait till the spring, they’ll be able to have better luck at finding what they want.

Such thinking could cost you a brick of cash. Because = there’s another key component you overlook if you’re just keeping track of inventory as an indicator of when you should buy. It’s the interest rates. It could cost you thousands of dollars per year to wait when you consider where they are right now and what could happen by the spring of 2018.

Here are some simple calculations – if you’re buying a $500,000 house with 5% down at an interest rate of 3.5%, the payment is roughly $2,641 in Fairfax County, VA… When that rate moves up a percent to 4.5%, your cost goes to $2,915. Same house, same taxes – $3288 MORE per year…$16,444 over the next 5 years — more than $30K in 10 years.

Waiting could cost you. The smart buyer stops waiting and get’s in the game! Got a question or need professional help? Contact me here: http://www.anthonycarr.net/contact/.

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I have a plumber in my house fixing a leak that I “thought” I noticed about a week ago. But I let it go. “Naah. It’s not a leak – probably just creekings of a 40-year-old house,” I second thought-ed it. Now – wet floor, carpet and drywall one week later – I realized again – I shouldn’t have waited.

There are plenty of things we shouldn’t wait on. Home maintenance and repair is one of them. Another for real estate professionals is how you treat your business. Work toward the market that’s coming, not in the market you’re in.

We are in a very hot market – low inventory, rising prices, few days on market – sound familiar? The difference this time, though is that there’s no frothing in the market and the appraisers are doing a good job at keeping prices in line. We’re not seeing consistent 10-20% increases in the values.

But – as a professional – work toward the market that’s coming. We know real estate, just like the stock market, runs in cycles. We may be ending this last run-up cycle. For Northern Virginia, we’re still running strong – but that doesn’t mean, keep marketing and working like you’ve been working and marketing the last 10 years.

It’s time to keep your finger on the pulse of pricing even more than before. Watch the inventory closer. Start connecting with your database of relationships consistently and letting them know what’s happening to the market and to their home value.

Note cards, popping by to see folks, and calling them to check in must be a consistent, daily routine for any real estate agent who wants to weather the ups and downs of our industry.

Don’t wait! When you think you should call someone, drop by and see them or send a note – do it!

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If you really want to know how a real estate market is going, look at the absorption rate. The absorption rate measures how long it takes to absorb the inventory of homes at the rate houses are going under contract. I.e., if there are 100 homes and 50 go pending in the last 30 days, then that reflects a 2-months supply (100/50=2).

Sellers markets are under 3 months; normal are between 4-5 and anything over 6 is considered a buyers market. The DC market is pretty much a seller market all around. I measure the DC and Northern Virginia counties surrounding DC.

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When an agent shoves paper under your nose to sign, seal and deliver on your next real estate contract, remember, it’s because Aunt Virginia or Uncle Tex(as) is requiring your John Hancock, not the agent. There are 50 ways to do real estate in the United States, because real estate licensing and practices are governed by state law (even though there is an overlay national standard as well).

Trust me – when we have a contract in Northern Virginia of 16 pages, and 250 blanks and boxes to fill out – we’re not looking for some creative means of getting our clients to sign in one more spot for our health or amusement.

Signatures are required by state commissions to make sure YOU are informed and understand what it is you’re signing. You will have three classes of documents to sign along the way to buying or selling your next home.

1- Disclosures. Do you know if the house you’re interested in is next to a pig farm? States have various levels of disclosures and forms that inform consumers. The disclosure is not a binding document, just a disclosure. Some of them provide buyers opportunity to cancel a contract after a certain number of days if they don’t like what is being disclosed, some don’t.

2- Agreements. These are between you and your agency. The agreement to list your home, work in a buyer agency relationship, etc. these are binding, and will have various ways to be enforced and/or cancelled.

3- Contracts. These are the big documents. You’re deciding to sell your house to another person and what you’re signing puts you on a track to turn over the keys in exchange for thousands of dollars. These documents are loaded with promises, accountability and legal requirements for all parties on the contract.

While electronic signatures have simplified the process of signing, box checking and initialing – be sure you know what you’re “clicking” through – don’t be so quick to click when you don’t understand the contract or addenda that is managing the exchange of what is for most people – the most expensive transaction in their lives.

Until next time…

Anthony Carr started in the real estate industry as a real estate editor, and finally switched over to working in the business in 1995. He quickly built his business through a close-knit group of advocates of friends, past clients and business associates. To this day he works by referral to help people sell, buy and invest in real estate

In the DC market, the pendings are NOT down. In fact, year to date in Northern Virginia – pending sales are up for the year +15.8%) , for January (+18.3%) and MTD for February (+14%), according to data from the local multiple listing service.
It’s a strong market in N. Virginia even though the inventory has shrunk since last year, sellers are finding multiple offers in some cases, and buyers have continued enjoying affordable interest rates.

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This isn’t the most exciting blog entry – but to my investor friends and agent followers – READ ON FOR WISDOM!

When potential investors tell me they want to purchase real estate, I ask them – tell me what you envision your end to be. Are you looking for a cash flow monthly or are you looking for asset growth?

These two objectives provide different approaches in the beginning of the buying process. For the investor seeking a cash flow, s/he usually has lots of cash and looking for somewhere to park the money and pull down an income each month. That’s different than the investor looking for the asset to grow who may be wanting to leverage their funds with a mortgage so they can count on two things – OPM (other people’s money) paying off the mortgage, and the market growing their asset, thus growing their equity.

Asset growth is how an investor gains a return on investment (ROI) in the double digit percentages consistently. For instance, let’s say you purchase an investment property with 20% down – say $40,000 on a $200,000 purchase. If that condo grows in value by 5% per year (i.e., $10,000), the investor’s cash growth is actually at 25% ($10,000/$40,000).

Meanwhile, the tenant’s rent is making the mortgage payment each month, thus paying down the mortgage for the investor so the equity is growing year after year.

For the cash buyer, however, it’s more about – what can s/he take out of the property each month for cash. If the house is purchased for the same amount – and the rent is $1,500 per month, with a $300 condo fee and $150 property tax, then the net cash flow for the year is $12,480 per year. On the initial purchase of $200,000, the cash return is about 6% per year – in cash. It’s like you own a stock paying dividends – on a monthly basis.

When you’re looking to invest – what is your end game? Until next time…

Anthony Carr is the Director of Training for Keller Williams Realty Falls Church, VA. KWFC is in the Top 10 real estate offices in Northern Virginia according in both agent count and sales volume. His real estate career is diverse and he’s a sought out speaker, author, blogger and problem solver. Mr. Carr is the author of “Real Estate Investing Made Simple: A commonsense approach to building wealth”; and he was a contributing writer to “The Best Real Estate Advice I Ever Received,” published by the Donald Trump organization. He holds associate brokers licenses in Virginia, Maryland and Washington DC.